Alternative Financing in Digital Real Estate Rights

Abstract

The issue the study addresses consists in the insufficient and fragmented legal regulation of digital real estate rights in Russia, which limits developers’ ability to leverage their security function to attract alternative financing. The research methodology is based on a comparative legal analysis of international practices in regulating real estate virtual assets (RWA), and a dogmatic analysis of the Russian legislation on digital financial assets and investment platforms. The study findings demonstrate that the current Russian legal regime for digital real estate rights, unlike some foreign jurisdictions, does not enable investors to acquire property rights to a property, limiting them to obligatory claims against the issuer. Despite this, raising funds in this manner may be applicable to lending for residential construction projects under construction contracts using escrow accounts. Such digital rights function as a hybrid investment instrument, similar to asset securitization, and provide developers with flexibility in liquidity management. The study’s contribution includes systematizing legal risks for investors, as well as identifying the benefits of alternative financing for developers, which can be employed to improve legislation and develop more secure financial products in the digital real estate market.